Jury Says Software Patents have Little Value

A jury in San Jose, California delivered a verdict in the second Apple v Samsung patent infringement trial late Friday. In the earlier trial, a jury found that Samsung willfully infringed Apple’s hardware patents and slapped Samsung with a verdict of about $2 billion. The case decided Friday covered Apple’s software patents.

This jury also found that Samsung willfully infringed Apple’s patents – this time software patents – but the jury essentially found that software patents are worth very little, with the award being only about $120 million (less than one tenth the amount awarded for violating the hardware patents).

So, what were the differences between the two trials? The facts presented about Samsung’s decision to copy Apple technology as a business strategy was the same, and the factual finding on that matter was the same – why did the early jury find Samsung’s actions to be so egregious when the second jury determined that it was only worth a slap on the wrist?

The analysis has to begin with the fact that the first jury included someone with a technical background. The foreman of the first jury had worked to develop technology products and even had a couple of patents in his own name. His personal knowledge of the time and effort that goes into innovation undoubtedly swayed the first jury towards a significant punishment of Samsung for stealing intellectual property. The second jury, however, had no one with a technical background. They were apparently swayed by Samsung’s argument that patents really have little or no value (a position that seems rather hypocritical when Samsung has been filing patents for patent infringement around the world, but the jury did not get to hear about that).

If such small awards for willful infringement become the norm, then Samsung will have been proven right. Patents will, in fact, have little or no value – because the rational business strategy will be to look around for the best new technologies and simply use them without permission and without license. The stealing company will make much more money in profits than they will ever have to pay in damages when they ultimately (years later) are found by a jury to infringe.

This case is by no means finished – both Apple and Samsung are sure to appeal aspects of the decision that they do not like. But if the finding and the amount of damages both stand up as determined by the jury, the losers will be all of us that have gained so much by rapid innovation in the technology industry. If Apple had known that Samsung would be allowed to adopt a strategy of copying the hardware and software innovations in the iPhone and iPad and using Apple’s innovations to build a huge smartphone business in competition with Apple, would Apple have allocated the large amounts of money and engineering resources that were required to create the breakthrough that was the iPhone?

The patent system was designed to provide a inventor with rewards for past innovations and incentives to continue innovating int he future. A case like this, which says that the better economic decision is to copy rather than invent, undercuts the purpose of the patent system.